1. Prime Minister Ariel Sharon thanked the security forces for last night's
successful and very important action in Hebron. This was a vital action
designed to provide security for Israel's citizens.

Prime Minister Sharon noted that Israel has proposed to - and even demanded
from - the Palestinians that they accept the responsibility to carry out
serious counter-terrorist actions against the terrorist organizations, the
terrorists and their infrastructure. The Palestinians must accept
responsibility and act against terror. If this is not done and they do not
accept the responsibility or do not act with due seriousness in these
places, we will continue with our actions in order to provide security to
Israel's citizens.

Prime Minister Sharon briefed the cabinet on his meeting with US Secretary
of State Colin Powell on Friday. The Prime Minister thanked the Secretary
of State for his personal involvement in the diplomatic process and for the
American administration's efforts to advance peace in the region.

The Prime Minister added that Israel would do everything in its power to
assist US special envoy Ambassador John Wolf in his mission in the Middle
East.

Prime Minister Sharon also said that he told Secretary of State Powell that
Israel would not participate in negotiations under fire, and that as long as
terror, violence and incitement continue in the area, it would be impossible
to advance the diplomatic process.

The Prime Minister said that Israel is ready to transfer security
responsibility to the Palestinians in any designated area. The Israeli
position is that in all places where the Palestinians assume security
responsibility, they will be responsible for stopping violence and carrying
out comprehensive counter-terrorist operations in order to prevent attacks.
In areas where the Palestinians do not take responsibility, they will be
fully obligated to make every effort to prevent terror attacks. In the
event that the Palestinians do not carry out their responsibilities
satisfactorily, Israel will be forced to operate in those areas as it sees
fit.

Prime Minister Sharon emphasized that Israel would not agree to any
settlement between the Palestinian Authority and terror organizations that
does not include dismantling the infrastructure of, and disarming, the
latter.
.

A ceasefire can only be a short and rapid stage as part of the overall
process and it will be unacceptable if it comes instead of a real war
against terror. The process must include the dismantling and disarming of
the terror organizations as well as the stopping of all incitement.

The Prime Minister highlighted the matter of incitement in his meeting with
the US Secretary of State and said that it must be ended immediately and
completely, in every place it is found. Stopping incitement is in no way
connected to responsibility over security and can take place without delay.

US Secretary of State, Colin Powell said that he sees eye to eye with Prime
Minister Sharon on these matters and repeated the US's deep commitment to
Israel's security, and added that this is not a matter on which there can be
compromise. The US Secretary of State agreed that all violence must end and
that the Palestinians must take real steps against terror and violence.

The meeting took place in a friendly atmosphere as befits the deep
understanding that exists between Israel and the US.

Prime Minister Sharon expressed his commitment to the political process and
his hope that it would result in a settlement and peace.

2. Defense Minister Shaul Mofaz briefed ministers on ongoing security
matters, noted that although more than two weeks have passed since the Aqaba
summit, efforts to perpetrate terror attacks against Israel continue without
respite, and added that the Palestinian Authority is demonstrating a total
lack of responsibility on the matter.

Defense Minister Mofaz said that while Israel has entered into a dialogue
with the Palestinian Authority on security matters, the other side has
refused to accept security responsibilities, citing various grounds for
shirking its commitments. The Defense Minister understood that the
Palestinian Authority prefers to reach a ceasefire agreement with Hamas
before accepting any kind of security responsibilities.

Defense Minister Mofaz stated that Israel is not interested in the
Palestinian Authority's internal considerations, and that it is its
responsibility to fight terror. The Defense Minister added that if the
Palestinian Authority refuses to recognize the fact that terror is
continuing and that it must fight it, Israel would be forced to do so.

The Defense Minister added that the Palestinian Authority must also deal
with external sources which support and finance terror.

Defense Minister Mofaz reported on his visit to the Paris air show and noted
IAI's achievements.

3. Attorney-General Elyakim Rubinstein briefed ministers on his
participation in the international conference on anti-Semitism, which
recently took place in Vienna.

4. The government made it clear that it attributes great importance to the
assistance given to former SLA soldiers, in their absorption and integration
into Israeli society. Former SLA soldiers will be entitled to financial,
housing and retraining assistance.